Dan Gallagher, every conservative’s favorite voice on the Securities and Exchange Commission, streaked across the regulatory firmament yet again this week, this time commenting on the Labor Department’s proposed new fiduciary standards for broker-dealers and celebrating a court decision that  

The proposal brings within the Employee Retirement Income Security Act’s definition of “fiduciary” any individual receiving compensation for providing individualized advice for a plan participant or IRA owner making a retirement investment decision. As usual, the Obama Administration proposed it, so Gallagher opposed it.  In this case, he opened fire on the Labor Department’s proposed rules to impose a uniform fee structure and fiduciary  

“Proving that the nanny-state is alive and well, DOL is proposing to substitute its judgment for that of investors in deciding the type of financial professional and fee structure all investors should use when investing their retirement savings. In doing so, it has ignored the benefits to investors of a disclosure-based approach to mitigating potential conflicts of interest,” he said in a statement.

Gallagher elaborated in a comment letter to the Labor Department. “It is clear to me that the DOL rulemaking is a fait accompli and that the comment process is merely perfunctory, yet I feel compelled to weigh in on the Fiduciary Proposal because I am convinced that the rule, when finalized, will harm investors and the U.S. capital markets,” he wrote, “The proposal is grounded in the misguided notion that charging fees based on the amount of assets under management is superior in every respect and for every investor to charging commission based fees. It brazenly dismisses both suitability as a proper standard of care for brokers and the FINRA arbitration system as a mechanism to resolve disputes between financial professionals and their clients- good for plaintiffs' lawyers, bad for investors.”

He added: “Broker-dealers utilizing a commission-based fee structure will find it difficult, if not impossible, to navigate the labyrinth of prohibitions and exemptions contemplated by the proposal, and many will make the unfortunate- yet entirely rational- choice to stop servicing certain retirement accounts. High net worth broker-dealer clients will be moved into fee-based advisory accounts and will pay a premium to the existing commission structure. Less well-heeled customers will be ‘fired’ by their brokers or jettisoned to robo-advisers.”

Gallagher and Commissioner Michael Piwowar also cheered a unanimous decision by the U.S. Court of Appeals for the D.C. Circuit that the SEC cannot apply a Dodd-Frank Act provision to bar an individual from associating with municipal advisors and nationally recognized statistical rating organizations based on conduct that took place before the legislation was enacted. The alleged market manipulation alleged involved the now-prohibited practice of “marking the close,” influencing the closing price of a security by executing purchase or sale orders at or near the close of trading.

 “Not only have we dissented from every vote to impose such retroactive collateral bars since we joined the Commission, but we have also publicly criticized the majority’s legal analysis with respect to the imposition of such bars,” they wrote. “The Commission should promptly take appropriate action to address all impermissibly retroactive collateral bars that have been misapplied since the enactment of Dodd-Frank.”